Revenue/ Income tax law

Sources of income which is subject to income tax are as follow:

• Gains and profits from trade, profession and business
• Salaries, remunerations, gains and profits from an employment
• Dividends, interests or discounts
• Rents, royalties or premiums
• Pensions, annuities or other periodic payments/li>
• Other gains or profits of an income nature not mentioned above.

in an example:
Harlina operates a petrol station in Greenlane, Penang,
under the dealership operated by Petronas. under
the dealership agreement with Petronas, the principal
agreed to reimburse Harlina in respect of sums expended
by heron sales promotion, advertising, etc, in return for Harlina
agreeing to buy for resale only the company's brand
of petrol. During the year 2007, a reimbursement
of RM50,000 was receivable from Petronas in respect
to a lucky draw organizedby the petrol station.

Issue: Advise Harlina on whether the reimbursement of RM50,000 payable
by Petronas is taxable.

Discussion : It is taxable. Such a receipt is in essence a recovery of advertising and
promotion expenses which are deductible business expenses.